Attached files
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| 8-K - CURRENT REPORT ON FORM 8-K DATED MAY 13, 2020 - PGT Innovations, Inc. | form8k_05132020.htm |
| EX-99.1 - EARNINGS RELEASE DATED MAY 13, 2020 - PGT Innovations, Inc. | ex991_05132020.htm |
EXHIBIT 99.2
Q1 2020 Financial results May 13, 2020
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FORWARD LOOKING STATEMENTS Statements in this presentation regarding our business that are not
historical facts are “forward-looking statements” that involve risks and uncertainties which could cause actual results to differ materially from those contained in the forward-looking statements. Such forward-looking statements generally can
be identified by the use of forward-looking terminology, such as “expected,” “excited,” “guidance,” “believe,” “expect,” “may,” “outlook,” “forecast,” “intend,” “could,” “project,” “estimate,” “anticipate,” “should,” “plan” and similar
terminology. These risks and uncertainties include factors such as:the impact of the COVID-19 pandemic and related measures taken by governmental or regulatory authorities to combat the pandemic, including the impact of the pandemic and these
measures on the economies and demand for our products in the states where we sell them, and on our customers, suppliers, labor force, business, operations and financial performance; unpredictable weather and macroeconomic factors that may
negatively impact the repair and remodel and new construction markets and the construction industry generally, especially in the state of Florida and the western United States, where the substantial portion of our sales are currently generated,
and in the U.S. generally; changes in raw material prices, especially for aluminum, glass and vinyl, including, price increases due to the implementation of tariffs and other trade-related restrictions; our dependence on a limited number of
suppliers for certain of our key materials; our dependence on our impact-resistant product lines and contemporary indoor/outdoor window and door systems, and on consumer preferences for those types and styles of products; the effects of
increased expenses or unanticipated liabilities incurred as a result of, or due to activities related to, our acquisitions of NewSouth and Western Window Systems; our level of indebtedness, which increased in connection with our acquisition of
Western Window Systems, and increased further in connection with our acquisition of NewSouth; increases in bad debt owed to us by our customers in the event of a downturn in the home repair and remodeling or new home construction channels in
our core markets and our inability to collect such debt;the risks that the anticipated cost savings, synergies, revenue enhancement strategies and other benefits expected from our acquisitions of NewSouth and Western Window Systems may not be
fully realized or may take longer to realize than expected or that our actual integration costs may exceed our estimates; increases in transportation costs, including due to increases in fuel prices; our dependence on our limited number of
geographically concentrated manufacturing facilities; sales fluctuations to and changes in our relationships with key customers; federal, state and local laws and regulations, including unfavorable changes in local building codes and
environmental and energy code regulations; risks associated with our information technology systems, including cybersecurity-related risks, such as unauthorized intrusions into our systems by “hackers” and theft of data and information from our
systems, and the risks that our information technology systems do not function as intended or experience temporary or long-term failures to perform as intended; product liability and warranty claims brought against us; in addition to the
acquisitions of NewSouth and Western Window Systems, our ability to successfully integrate businesses we may acquire in the future, or that any business we acquire may not perform as we expected at the time we acquired it; and the other risks
and uncertainties discussed under “Risk Factors” in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended April 4, 2020, and “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December
28, 2019 and our other SEC filings.Forward looking statements in this presentation include our expectations regarding: (i) the impact of our strategic pillars on customer and shareholder value; (ii) our financial flexibility, including our
ability to minimize and prioritize capital expenditures, reduce discretionary spending and manage costs through initiatives, optimize net working capital, and focus on preserving cash; (iii) our balance sheet and liquidity positions; (iv)
driving margin through strategic growth projects; (v) maintaining a conservative capital structure; (vi) our long-term target net debt-to-EBITDA ratio; (vii) the possible timing and benefits of any future acquisitions; (viii) expansion into new
geographies, customer markets or different marketing positioning; (ix) continuing to invest in talent and R&D; (x) continued focus on operational efficiencies; (xi) execution of our strategy creating long-term shareholder value; and, (xii)
being well positioned with diversified product portfolio to capture profitable growth. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Except as required
by law, the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances from the date of this presentation. 2
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Use of Non-GAAP Financial Measures This presentation and the financial schedules include financial
measures and terms not calculated in accordance with U.S. generally accepted accounting principles (GAAP). We believe that presentation of non-GAAP measures such as adjusted net income, adjusted net income per share, and adjusted EBITDA
provides investors and analysts with an alternative method for assessing our operating results in a manner that enables investors and analysts to more thoroughly evaluate our current performance compared to past performance. We also believe
these non-GAAP measures provide investors with a better baseline for assessing our future earnings potential. The non-GAAP measures included in this release are provided to give investors access to types of measures that we use in analyzing our
results.Adjusted net income consists of GAAP net income adjusted for the items included in the accompanying reconciliation. Adjusted net income per share consists of GAAP net income per share adjusted for the items included in the accompanying
reconciliation. We believe these measures enable investors and analysts to more thoroughly evaluate our current performance as compared to the past performance and provide a better baseline for assessing the Company's future earnings potential.
However, these measures do not provide a complete picture of our operations.Adjusted EBITDA consists of net income, adjusted for the items included in the accompanying reconciliation. We believe that adjusted EBITDA provides useful information
to investors and analysts about the Company's performance because they eliminate the effects of period-to-period changes in taxes, costs associated with capital investments and interest expense. Adjusted EBITDA does not give effect to the cash
the Company must use to service its debt or pay its income taxes and thus does not reflect the actual funds generated from operations or available for capital investments.Our calculations of adjusted net income and adjusted net income per
share, and adjusted EBITDA are not necessarily comparable to calculations performed by other companies and reported as similarly titled measures. These non-GAAP measures should be considered in addition to results prepared in accordance with
GAAP but should not be considered a substitute for or superior to GAAP measures. Schedules that reconcile adjusted net income, adjusted net income per share, and adjusted EBITDA to GAAP net income are included in the financial schedules
accompanying this release.Adjusted EBITDA as used in the calculation of the net debt-to-Adjusted EBITDA ratio, consists of our adjusted EBITDA as described above, but for the trailing twelve-month period, adjusted pursuant to the covenants
contained in our credit agreements. 3
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Response to COVID-19 Team Members, Customers and Communities Are Our Top Priority Safeguards in
Place Following World Health Organization and U.S. Centers for Disease Control and Prevention guidelines for personal health and safetyIncreasing cleaning frequency and enhancing sanitization of all facilitiesAdjusting production schedules and
operations to promote social distancingRestricting external visitor access to facilitiesImplementing work at home programs where possibleRestricting all nonessential air travel Financial Flexibility Current available liquidity of $144
million, including cash on hand of $68 million and undrawn revolver capacity of $76 millionNo scheduled debt payments required until maturity of $64 million term loan due October 2022Minimizing capital expendituresReducing discretionary
spendingOptimizing net working capitalFocusing on preserving cash 4
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Executing 4 strategic pillars expected to create long-term Customer and Shareholder Value 01.Driving
brand recognition, loyalty and growth with customer-centric innovation 02.Attracting and retaining talented, dedicated leaders to drive our business 03.Investing in our business and scaling our operations to meet expected increasing long-term
demand 04.Strategically allocating capital generated from our free cash flow to support profitable growth 5
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First Quarter key Messages Q1 2020 vs. Q1 2019 Net Sales $220M 27% ↑ Gross
Margin 36.8% 1.3% ↑ Adj. EBITDA1 Margin 17.9% 1.6% ↑ HighlightsStrong legacy organic sales growth of 18% $16 million sales contribution from NewSouthMargins benefitting from higher sales and lower direct labor and material
costsAdditional cost savings expected to be realized from consolidation of manufacturing footprint 1. Refer to reconciliation to GAAP. 6
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Market Performance: LEGACY BUSINESS (SEBU1 & WEBU2) CommentaryQ1’20 order entry up 23% in legacy
SEBU and 13% in WEBU; 21% overall growth in organic ordersQ1’20 legacy backlog up 30% YoY April orders down 10% YoY for legacy SEBU and 23% YoY for WEBU; legacy backlog continued to grow in April as we build capacityNewSouth retail orders
increased over 50% YoY in Q1’20 and over 40% YoY in April; retail backlog of ~$25M at end of Q1’20, grew to ~$28M in April Legacy Backlog3 ($000s) 1. Southeastern Business Unit, excludes NewSouth; 2. Western Business Unit; 3. Excludes
NewSouth. 30% GROWTH 7 SEBU1 YoY Order Growth WEBU2 YoY Order Growth 11% GROWTH
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Q1 2020 RESULTS Q1 2020 vs. Q1 2019 Net Sales $220M 27% ↑ Gross
Margin 36.8% 1.3% ↑ Adjusted EBITDA1 $39.4M 39% ↑ Adj. Diluted EPS1 $0.28 75% ↑ HighlightsStrong organic sales growth in both R&R and New Construction; benefit of extra selling week vs prior year quarterSoutheastern Business
Unit sales up organically 18% YoY with corporate builder and out-of-state sales each growing approximately 30% YoYWestern Business Unit sales up 14% YoYNewSouth sales growth met internal expectationsPlant consolidation expected to reduce
annualized operating expenses by $3.5M – $3.8M 1. Refer to reconciliation to GAAP. 8
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Balance sheet and Liquidity Update NET LEVERAGE Total Debt Outstanding $429.0M Less: Cash
$67.6M Net Debt $361.4M LTM Adj EBITDA $150.0M Net Debt to Adj EBITDA 2.4x LIQUIDITY PROFILE Cash $67.6M Unused Credit Capacity $76.0M Total Available Liquidity $143.6M Senior Notes (Aug 2026) $365.0M Revolving Credit (Oct
2022) $64.0M Total Debt Outstanding $429.0M Debt Maturity Schedule Term Loan Senior Notes COMMENTARYStrong and flexible balance sheet positions Company to navigate uncertainty due to the pandemicTerm loan of $64 million maturing in
2022, senior notes due 2026Net debt to adjusted EBITDA ratio of 2.4x pro forma for NewSouth acquisitionCost management initiatives and prioritized capital expenditures 9
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Strong balance sheet 1. Net debt is total consolidated funded indebtedness as of 04/04/2020 and
calculated in accordance with our credit agreement. Adjusted EBITDA is calculated in accordance with our credit agreement. Refer to reconciliation to GAAP. 2. Leverage ratio defined as net debt divided by trailing-twelve-month adjusted EBITDA;
refer to reconciliation to GAAP. HighlightsEnded Q1 2020 with net debt of $361 million, up from $282 million in Q4 2019 driven by $50 million of senior notes in conjunction with NewSouth acquisitionNet debt to trailing-twelve month adjusted
EBITDA of 2.4 times, pro forma for NewSouth acquisitionProven track record of deleveraging following acquisitions Net Debt1 and Leverage Ratio2 ACQUIRED ACQUIRED ACQUIRED 10 ACQUIRED
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Long-Term Capital Allocation priorities; primary focus for 2020 to preserve cash 11 INTERNAL
INVESTMENT Strategic growth projects expected to drive margin improvement 01 DEBT REDUCTION Expect to maintain a strong balance sheet and conservative capital structureLong-term target Net Debt to EBITDA Ratio of 2x –
3x 02 STRATEGIC ACQUISITIONS Any potential future acquisitions most likely 2021 or beyondOver the long term, strategic acquisitions are expected to grow shareholder valueExpansion into new geographies, customer markets or different
market positioning 03
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12 Why Invest inPGT Innovations 01 National leader in growing premium impact-resistant and indoor /
outdoor window and door category 02 Expect to continue investing in talent and R&D to remain an industry leader in innovation and product development 03 Continued focus on operational efficiencies expected to drive additional margin
expansion 04 Execution of our strategy expected to create long-term customer and shareholder value 05 Well positioned with diversified product portfolio to capture profitable growth in new construction and R&R channels
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Q&A
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Appendix Reconciliation to Adjusted Net Income, Adjusted Net Income per Share-diluted, Adjusted EBITDA,
and Adjusted EBITDA per our bank covenants
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Reconciliation of GAAP to NON-gaap MEASURES(unaudited - in thousands, except per share amounts)THREE
MONTHS ENDED APRIL 4, 2020 AND MARCH 30, 2019 15 THREE MONTHS
ENDED 4/4/2020 3/30/2019
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16 Reconciliation of GAAP to NON-gaap MEASURES(unaudited - in thousands, except per share
amounts)THREE MONTHS ENDED APRIL 4, 2020 AND MARCH 30, 2019
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Reconciliation of GAAP to NON-gaap MEASURES(in MILLIONS) 17
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18 Reconciliation of GAAP to NON-gaap MEASURES Represents the total of the adjustments consistent
with previously published and publicly available earnings releases as issued by the Company relating to the period for which the total adjustments is presented.Beginning in 2018, the Company updated its reporting of adjusted EBITDA for its
publicly issued earnings to exclude non-cash stock-based compensation expense. As such, the total of the adjustments per previously published earnings as presented herein will not agree to the total adjustments as previously issued for periods
prior to 2018, as they have been revised as a result of this change in presentation.Calculated in accordance with the covenants pursuant to the Company’s then existing credit agreement, which includes adjustments for expected cost savings,
operating expense reductions and synergies related to acquisitions, as well as the earnings of the acquired entity on a pro forma basis for any pre-acquisition period within the trailing twelve-months relating to the period of the
calculation.
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